Senate Passes Tax Bill with MSR Exception; House to Vote Again Today
The Senate early this morning approved a massive overhaul of the U.S. tax code that includes a Mortgage Bankers Association-supported exception for tax treatment of mortgage servicing rights. The bill now goes back to the House, which must vote again on the legislation following a procedural glitch.
After midnight, the Senate approved H.R. 1, the Tax and Jobs Act, by a 51-48 vote. The vote came after the Senate parliamentarian ruled that the version approved by the House yesterday included several provisions involving treatment of educational funds that violated Senate budget rules. Senate Republicans removed those provisions prior to the vote.
Earlier yesterday, the House yesterday passed H.R. 1 largely along party lines, 227-203, with 12 Republicans joining 191 Democrats in opposing the bill. House Speaker Paul Ryan, R-Wis., said the House would revote on the bill later this morning.
Importantly for the real estate finance industry, the final bill included several key provisions, including an amendment by Sen. Mike Rounds, R-S.D., that creates an exemption by any item of gross income in connection to a mortgage servicing contract. This amendment, strongly supported by MBA, allows mortgage lenders and servicers to continue current tax treatment of mortgage servicing rights.
The bill also preserves current law by allowing homeowners to exclude up to $500,000 on the gain on the sale of a home; inclusion of the Low-Income Housing Tax Credit program and tax-exempt status for private activity bonds; preservation of business interest deductibility for real estate; preservation of Section 1031 like-kind exchanges for real estate property; and the option of deductibility of up to $10,000 in property taxes.
MBA President and CEO David Stevens, CMB, issued a statement commending House and Senate leadership for preserving these real estate finance provisions. “Specifically, we are grateful for the amendment to Section 13221 of the original Senate-passed bill offered by Senator Mike Rounds, to create an exception for any item of gross income in connection to a mortgage servicing contract,” he said. “MBA looks forward to working with policymakers on implementation of this legislation.”
Ahead of the votes, MBA sent a letter to House and Senate leadership, urging them to keep these key provisions in the final legislation.
“MBA continues to support the goal of enacting tax legislation that spurs jobs and economic growth–and the conference agreement represents an important and necessary step toward that goal,” Stevens wrote.
Stevens noted had the final bill not included the Rounds amendment, which creates exceptions for mortgage servicing, “the change in tax accounting for mortgage servicing rights would have had a devastating impact on the flow of capital that supports a robust and competitive real estate finance market, both single-and commercial/multifamily.”
